Good Investors Get Out

The essence of investing is consumer spending.  As an investor trying to judge the viability of consumer demand just can’t be done behind a desk.  Desk work involves news stories, financial reports, and quarterly calls.  Each one on their own has flaws.  News stories are meant to sell media and subscriptions.  Financial reports show a picture of today and the past, but not what might be tomorrow.  Quarterly calls are biased.  Analysts need to keep their jobs and company spokesperson’s are generally pro their company.

Your Eyes as an Investor

If you’re not out you can’t see.  It is estimated scientifically that a human’s eyes consume or use over 50% of the brain’s cortex to process information.  This large portion of brain use is a good reason to trust what you see versus what you’re told or read.

In 1963, President John F Kennedy was shot.  It was also the year of the famous American Express salad oil scandal.  A gentleman named Anthony “Tino” De Angelis was employing dirty tricks by using fake barrels of salad oil to secure loans with American Express’s Warehousing subsidiary as one of the stooges.  After the discovery of the scam, investor’s were selling the stock fast, since De Angelis’s swindle owed lenders $150-175 million in losses.  


Buffett, being the opportunist, aware of American Express’s trusted reputation noticed while out and about that consumers were still using their AE card and AE travelers cheques. Buffett sent one of his lieutenant’s out to investigate and confirm his suspicions.  His lieutenant questioned travelers cheque users and card users, bank tellers, restaurants, and retailers to gauge if usage was slowing down.  Buffett, after seeing the results, determined that the scandal hadn’t altered the consumer’s use of American Express products.  Buffet began investing in American Express. Today it is one of his best investments ever made.

The world and markets operate off of randomness.  Buffett and his American Express investment may not have occurred without the daisy chain folly of events that unraveled the scandal.  If Buffett had paid attention to what was happening on Wall Street only and ignored what he saw with his own eyes on Main Street he may not have understood the opportunity that was unfolding.  This opportunity gave him the confidence to make the partnership’s largest investment of $3 million in 1964 which also became one of his most successful investments of all time.

Very little happens behind a desk or in an office that is worthwhile in determining a good investment.  I often wonder why so many analyst’s aren’t among the richest in the world?  They supposedly have access to all the key people and information.  It’s because in order to win big with investing it usually means concentration.  Concentration is hard, since concentration usually underperforms the markets somewhere around thirty percent of the time.  This means an investor has to have the guts to hang on when things seem the darkest and fearful.  It’s hard to do this when your investment was chosen only because of a report read, watched, or listened to in an office behind a desk.

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